CMA Final · Strategic Financial Management · Digital Finance
A digital wallet company has 2,00,000 users. Monthly churn is 5%. Average monthly contribution per active user is Rs 80 and customer acquisition cost is Rs 700. Using lifetime = 1/churn months and ignoring discounting, what is the lifetime value to CAC multiple?
The LTV to CAC multiple is 2.29 times. Expected lifetime is 20 months at 5% churn, so lifetime value is 80 x 20 = Rs 1,600, and dividing by the Rs 700 acquisition cost gives 2.29.
- A2.29 timesCorrect
- B0.44 times
- C5.71 times
- D1.14 times
Explanation
Lifetime = 1/0.05 = 20 months. LTV = 80 x 20 = Rs 1,600. LTV/CAC = 1,600/700 = 2.29. Inverting gives 0.44; using 1/0.05 as 50 months would be wrong.
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